Wednesday, January 06, 2010

Young Adults Are Key to Health Care Reform; But There Are Strong Incentives to Not Buy Insurance

FOX NEWS -- Young adults are in for a wake-up call if health care reform passes.

For the first time ever, the federal government is going to require that everybody obtain health insurance coverage. For those who have insurance through their employers, the so-called individual mandate may have very little impact. But for young adults, many of whom are not currently covered, the health care bill will add a new and costly expense to their budgets.

"The Census Bureau tells us there are 18 million people between the ages of 18 and 35 who are uninsured -- roughly half of the uninsured population are younger people in that age group," said Anne Kim, with the non-profit think tank Third Way.

MP: Actually for the age group below 35 years, there are 26.3 million uninsured Americans and that represents 57% of the 46.3 million uninsured (data here), see chart above. For the 18-34 year age group, there are almost 19 million uninsured, which is 41% of the total number of uninsured.

The federal government wants to require young, healthy people to buy insurance because if they don't, premiums for everyone else will go up. Insurance companies need low-maintenance, young customers on their rolls so they can raise money to cover benefits for less-healthy people the health care bill will require them to insure.

"If you don't have a mandate that gets in the young people who are cheaper, you're going to see average premiums rise," said Jim Kessler, vice president for policy with Third Way. "There's no way around that." But both houses passed two other reforms that create an incentive not to buy insurance.

"You can literally buy an insurance policy in the ambulance on the way to the hospital," said Douglas Holtz-Eakin, former director of the Congressional Budget Office. "You could imagine a situation in which you would pay the fines, stay out of the insurance pool, and at the moment when you need it, you go out and buy it."

2. The other disincentive is that both houses change how much older customers can be charged relative to younger customers. Analysts agree this will drive up the cost for young people, though it's not clear by how much.

"If you charge people a fair price, then a 50-to-60-year-old should pay about six times as much as a 20-year-old," said John Goodman, president of the National Center for Policy Analysis. But he noted that the Senate bill says older people can be charged only three times as much; the House bill says they can be charged two times as much. "So we're going to penalize low-income young people in order to lower the premiums for older wealthier people."

"Young people are going to bear a disproportionate cost in this reform," Holtz-Eakin said. The Senate tries to make it easier on the young by offering them a bare-bones insurance plan that would be less expensive than all the others. This is perhaps the keystone for the entire reform effort, because if young healthy people don't get into the insurance pool, everything else -- especially cost containment -- could fall apart.

MP: In other words, it seems like any real cost containment is pure fantasy, and will never happen under any conditions. Either you force 20-25 million young people to purchase insurance they aren't willing to buy now and overall costs go up, or the young people (and older people as well) pay the fine and remain uninsured until they need insurance (in the ambulance on the way to the hospital) and overall costs go up.

8 Comments:

Some people claim that younger people, although paying higher premiums now to subsidize the elderly, will get it back when they grow older. However, that ignores that not all young people grow to be old. It ends up being a subsidy from those who never get to be old to those that have a full life.

I want to thank all you young people for eagerly volunteering to pay for my retirement, health care, the "stimulus" and all the other spending that Obama and the Democrats have piled on you in their noble effort to bring about change and "social justice".

At first, I was angry at the injustice of it all. I thought it was immoral to burden future generations with so much debt. But when I saw your trance-like expressions as you chanted O-ba-ma, O-ba-ma, I thought, well, who am I to argue.

"For the first time ever, the federal government is going to [try to] require that everybody obtain health insurance coverage."

The Constitution grants limited, enumerated powers to the federal government. The power to force you to buy a service is not among those enumerated powers. The federal government has no authority to make us buy full coverage health insurance, an electric car, a poster of Obama, or anything else.

Didn't they already try this in Maine and it has gone very badly? The expected revenues and cost savings never appeared because people don't buy insurance until they need it.

The only conclusion possible is that the people that are pushing this know it won't work.

So why do they want it? I think they want it to fail badly to strengthen their argument that we should have a single payer system. Their tactic is to break the system so badly that the government will have to completely take it over.

Even if they can't force their reforms through, the same factors that are driving price increases now (mainly medicare, medicaid, and giving the tax break to employers rather than employees) will continue to drive up prices and drive out doctors, so they will still be able to argue that we need government insurance or a single payer system to "fix" things.

In other words, the government has already broken the system, it is just not happening quickly enough for them and they are trying to hurry up the demise.

The only solution I can see, unfortunately, is to elect a free market supermajority to the senate and a majority in the house and to get a free market president. Don't hold your breath though folks - freemarket folks are usually too busy earning a living to get involved in politics.

My only hope is that this monstrosity designed to hurry the demise of our free market medical system will fail, and private enterprise will fix the problem in spite of government regulations. YEs, the for profit clinics and such frequently cited by Professor Perry give me hope!

"Either you force 20-25 million young people to purchase insurance they arent' willing to buy now and overall costs go up"

How do costs go up if they all buy in? Costs wont go up because they are forced to buy insurance. They may very well go up because of the crushing demand 20-25 million MORE people will have on the SAME number (or less) of doctors.

Anon 5:41 PM. I completely agree with you. With Obama and the Democrat controlled Congress (both houses), the young people of today, largely responsible, have sentenced themselves to a lifetime of higher taxes, a lowered standard of living, and more egregious government control of all aspects of their future. I once was told by an HR person that the company preferred to hire younger people because we, as a society, were getting smarter; wrong. Thanks to the unionized educrats, the youth of today have been dumbed-down to actually believe the load the Democrats are feeding them (and, yes, Bush and the Republicans who were in charge from 2001-2007 are not totally without blame).